The President of the Independent Authority for Fiscal Responsibility (AIReF), Cristina Herrero, took part today in the 30th anniversary of Intereconomía and reviewed the evolution of fiscal supervision in Spain over the last three decades. Specifically, she highlighted the creation of AIReF in 2014, an institution that was “particularly timely and necessary” due to the state of public finances following the financial crisis, the complexity involved in its creation in a decentralised country like Spain along with the supervision system that existed prior to its creation, which depended on Europe and the Ministry of Finance.
Cristina Herrero began by congratulating Intereconomía on its anniversary and highlighted the work of the media, which promotes a well-informed society and acts as a mouthpiece for institutions such as AIReF. Thanks to the media, the institution’s messages reach both the General Government, AIReF’s natural target audience, and the rest of society, a personal goal set by the President in the strategic plan for her term of office.
Cristina Herrero reviewed the situation of public finances in Spain three decades ago when we were in the midst of joining the Economic and Monetary Union. At that time, finances enjoyed a situation of primary surpluses, a low-risk premium and a debt far removed from current levels. Oversight and supervision were exercised at a European level, through the Stability and Growth Pact (SGP). However, in 2001, the Law on General Budgetary Stability was approved in Spain, which gave the Ministry of Finance, assisted by the coordinating bodies, responsibility for ensuring compliance with the SGP.
However, the President recalled that the 2007 crisis marked a turning point in public finances in all euro area countries and the supervision system itself. In 2011, a major reform of the SGP was undertaken, leading to the birth of Independent Fiscal Institutions (IFIs), which aimed to give fiscal discipline a national and independent dimension.
In this context, AIReF was created in 2014, a new institution in Spain that stands out for its ex-ante risk alert supervision work, something that no institution had done before. In the short term, AIReF warns of possible breaches of fiscal rules and, in the long term, identifies sustainability risks. It also stands out for its independence and scope of action, as it carries out this work independently from the General Government (GG) and on each and every tier of government.
According to Cristina Herrero, since its creation, AIReF has established itself as a benchmark in fiscal policy and the economic and budgetary debate. The institution has been able to contribute its own voice by providing independent, rigorous and pragmatic instruments, data and analysis. Furthermore, since 2017, it has also played an important role in the evaluation of public policies. AIReF was identified as the appropriate institution to perform this function because of its privileged access to information from all GG sectors, which enables it to analyse cross-cutting policies, and its ability to make evaluations based on empirical evidence with a vocation to be useful for policy-makers.
After reviewing AIReF’s main functions, Cristina Herrero referred to the current state of public finances, which are at a key moment in determining fiscal policy for the coming years. She recalled that a new governance framework has been approved in Europe, which poses a considerable challenge for countries with high debt, such as Spain, which will have to present its Structural-Fiscal Plans in the near future to place debt on a downward path. According to AIReF’s estimates, the net expenditure of the GG Sector will have to show a more moderate dynamic in the adjustment period than observed in recent years in order to reduce debt.
To conclude, Cristina Herrero stressed the importance of transparency at AIReF, one of its guiding principles, along with independence and accountability. To ensure transparency, AIReF appears before Parliament, undergoes external evaluations, has an Advisory Board, publishes all its analyses on its website, creates interactive tools to make it easier for users to handle data and relies on the echo provided by the media – the institution’s great ally. Although a great deal of progress has been made, she admitted that some major communication challenges lie ahead, as it is necessary to continue to educate people about the institution and the work it carries out in order to make it truly useful to society as a whole. “Media outlets like yours are key to our success”, she concluded.
